2016 (5) TMI 1352 - HC - Income Tax

Court emphasizes assessing lack of international transaction for AMP expenses before further inquiries

The court condoned the delay in filing the appeal and focused on whether the ITAT adequately addressed the Assessee's claim regarding the absence of an ... International transaction involving the AE for AMP expenses - whether the ITAT ought to have addressed the issue raised by the Assessee that there was no international transaction entered into by it with its AE concerning AMP expenses? - Held that:- In the present case, the Court is of the view that it was incumbent upon the ITAT to have addressed the above issue since it was specifically raised before it by the Assessee. Only after satisfying itself that there was an international transaction with the AE concerning AMP expenses, should a further inquiry have been ordered for determination of the ALP of such international transaction. The impugned order of the ITAT is set aside. The Assessee’s appeal is restored to file and will be listed before the ITAT on 18th July, 2016 for first examining the question whether there was an international transaction involving the Assessee and its AE concerning AMP expenses for the AY in question. Depending on its decision on that issue, the ITAT will decide the further consequential issues. Issues:1. Delay in filing the appeal2. Whether the ITAT addressed the issue of international transaction for AMP expensesAnalysis:1. The judgment begins by condoning the delay in filing the appeal, as stated in the application, and disposes of the application accordingly.2. The main issue in this appeal is whether the ITAT addressed the Assessee's claim that there was no international transaction with its Associated Enterprise (AE) regarding Advertising Marketing and Promotion (AMP) expenses. The Court notes that the Assessee's case for other assessment years was considered in a previous judgment. Despite a mention of the Assessee's appeals in the judgment, the facts were not discussed, and the Assessee contests the finding of an international transaction. The Court emphasizes that for the Assessment Year (AY) 2006-07, the specific plea of the Assessee regarding the absence of an international transaction for AMP expenses was not decided by the ITAT, although the matter was remanded to the Transfer Pricing Officer (TPO) for determination of the Arms Length Price (ALP).3. Drawing parallels with a similar case, the Court highlights that in a previous judgment involving Sony Ericsson Mobile Communications India Pvt. Ltd., the Court remanded matters to the ITAT for examining the existence of an international transaction for another AY. In the present case, the Court opines that the ITAT should have addressed the issue raised by the Assessee before ordering further inquiries. The Court sets aside the ITAT's order and restores the Assessee's appeal for reevaluation by the ITAT regarding the existence of an international transaction for AMP expenses. The ITAT is directed to decide on this issue first before addressing any consequential matters.In conclusion, the judgment addresses the delay in filing the appeal and primarily focuses on whether the ITAT adequately considered the Assessee's claim regarding the absence of an international transaction for AMP expenses. The Court emphasizes the importance of addressing this issue before proceeding with further inquiries, setting aside the ITAT's order and restoring the appeal for reevaluation.